Advance tax is income tax paid during the year instead of waiting until return filing. For Tax Year 2026-27, the Income Tax Department confirms that the Income Tax Act, 2025 applies to advance-tax payments and that the basic policy framework remains unchanged. The Department's official Tax Payments FAQ explains the new section references, threshold, presumptive-tax rule and interest consequences.
Who has to pay advance tax?
Under section 404 of the Income Tax Act, 2025, advance tax is payable where tax payable during the year, computed under the advance-tax provisions, is ₹10,000 or more. This is a tax-liability test, not an income or turnover threshold. TDS and other relevant tax credits therefore matter when estimating whether advance tax is actually payable.
The practical exercise is to estimate full-year taxable income, compute tax under the applicable regime, reduce eligible tax credits such as expected TDS, and determine the balance advance-tax liability. The estimate should be revisited when income changes materially.
What are the normal instalments?
The standard pattern uses four cumulative instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. These are cumulative targets: at September, the target is 45% of estimated annual advance-tax liability, not another 45% on top of June.
How is presumptive business income different?
The Department's Tax Payments FAQ states that assessees opting for the presumptive taxation scheme under section 58 must discharge their entire advance-tax liability in a single instalment on or before 15 March under section 408(2).
Worked example
Assume a professional estimates annual tax after available TDS at ₹2,00,000 and is not covered by the presumptive single-instalment rule. The cumulative targets are ₹30,000 by 15 June, ₹90,000 by 15 September, ₹1,50,000 by 15 December and ₹2,00,000 by 15 March. If ₹30,000 was paid in June, the September top-up is ₹60,000.
If expected income later rises materially, the estimate should be revised rather than mechanically continuing with the original rupee amounts.
What happens if advance tax is short-paid?
The Department states that default interest rates remain unchanged. Section 424, corresponding to old section 234B, applies 1% per month or part of a month for the specified period where advance tax is not paid or is less than 90% of assessed tax. Section 425, corresponding to old section 234C, deals with deferment of instalments; the Department describes interest as 1% or 3% for the specified period depending on the statutory situation.
Select the correct Act and year
For income earned from April 2026 to March 2027, advance tax belongs to Tax Year 2026-27 under the Income Tax Act, 2025. The Department's e-Pay Tax general FAQ confirms this distinction. Payments relating to earlier periods, such as self-assessment tax for AY 2026-27, remain under the Income Tax Act, 1961.
How to pay advance tax online
The e-Pay Tax guidance lists Net Banking, Debit Card, Payment Gateway including UPI, NEFT/RTGS through a mandate form, and permitted over-the-counter modes. Taxpayers should create the appropriate challan, select the correct Tax Year and retain the receipt from Payment History.
Practical quarterly checklist
- Forecast full-year income: include all expected taxable income relevant to the taxpayer.
- Estimate tax: use the applicable regime and include surcharge and cess where applicable.
- Reduce expected credits: reconcile TDS and other available tax credits.
- Compare with the cumulative target: measure total advance tax paid against the percentage required at that stage.
- Update for new information: revise the forecast when profits, gains, bonuses or other income changes materially.
- Verify the challan: for Tax Year 2026-27 advance tax, use the Income Tax Act, 2025 framework and correct Tax Year.
- Keep evidence: retain computation workings and challan receipts.
Common mistakes
- Treating ₹10,000 as an income threshold rather than a tax-payable threshold.
- Reading 15%, 45%, 75% and 100% as separate percentages instead of cumulative targets.
- Ignoring expected TDS.
- Using the four-instalment schedule for a qualifying presumptive taxpayer.
- Failing to revise the estimate after unexpected income.
- Selecting AY 2026-27 or the old Act for advance tax on Tax Year 2026-27 income.
Practical takeaway
Advance tax is best managed as a rolling tax forecast. For Tax Year 2026-27, the ₹10,000 liability threshold continues under section 404, the normal framework uses cumulative instalments through June, September, December and March, and qualifying presumptive taxpayers under section 58 pay the full liability by 15 March. Re-estimate income at every instalment, account for TDS, pay shortfalls promptly and use the correct Tax Year when generating the challan.
